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Which Loan Is Best For First Time Home Buyers?

September 21, 2020

small home next to a calculator and house keys on top of some loan paperworkFor first-time home buyers, securing a home loan can be a difficult process. If you are a first-time home-buyer, It is helpful to become more informed on the different types of home loans and which is the most preferable option for you to make the process easier. Finding the right loan program for you can save you money, both at closing and long-term through reduced monthly payments. What follows is an overview of the four most notable types of home loans that first-time home-buyers should consider so that you have the knowledge you need to navigate the loan process.

Top Loans For A First-Time Home Buyer

There are four main types of loans that first time home buyers should consider: FHA, VA, conventional, and USDA loans. Each type of loan offers unique benefits and potential drawbacks, depending on each situation. Additionally, some may qualify for a certain type of loan but not another, and understanding what you qualify for is important.

FHA Loans

An FHA loan is a guaranteed loan by the Federal Housing Administration (FHA). This means the lender is reimbursed by the FHA if the borrower defaults on the loan. Notably, FHA loans are often the most generous type of loan for first-time home-buyers. You do not need a high credit score to qualify for the loan program, and it offers competitive interest rates compared to other programs.

Those who are interested in securing an FHA loan will need a minimum credit score of 580 if they are interested in making the minimum down payment of 3.5 percent. With that said, borrowers can receive an FHA loan with as little as a 500 credit score if they are able to make a 10 percent or higher down payment. Borrowers who choose an FHA loan are obligated to have mortgage insurance.

VA Loans

The VA loan program is designed for military members, veterans, and their spouses. This means only those who serve or have previously served in the military qualify, along with all who are married to someone in the military. There are very few downsides to the VA loan program, although it may be more difficult to find a lender that is approved to issue VA loans.

A VA loan may offer the most benefits of all the loans listed here. Those who qualify for a VA loan are not required to make a down payment and can enjoy low-interest rates. Those who qualify are also not obligated to purchase mortgage insurance, and typically have lower closing costs. The credit score requirements are also fairly low for a VA loan, with an average required minimum of 620.

Conventional Loans

hand holding a small home with the words conventional home loans above itA conventional loan requires a higher minimum credit score, but it offers unique benefits that are great for first-time home-buyers. If you have a credit score of 620 or higher, you should strongly consider a conventional loan.

Conventional loans typically only require a 3 percent down payment. This means a home that is purchased for $300,000 using a conventional loan will only require a down payment of $10,000. There is also no initial insurance fee, which can save the home buyer money at closing. Mortgage insurance is required if less than a 20 percent down payment is made, although it is cancelable.

Of course, the notable drawback to a conventional loan is that not all first-time home-buyers will qualify. It does require a higher credit score, so those who have less than a 620 credit score may be best-suited for an FHA loan if a VA or USDA loan is not an option.

USDA Loans

A USDA loan is a home loan provided by the U.S. Department of Agricultural. The purpose of the USDA loan program is to encourage more home buyers to purchase in more rural parts of the country. Subsequently, USDA loans are not available for homes that are in more urban areas. You can find out more information about eligibility requirements for a USDA loan on the U.S. Department of Agricultural website.

However, if you are willing to purchase in a rural area, a USDA loan offers intriguing benefits. Most notably, many USDA loans do not require a down payment. They often offer low-interest rates as well, along with relatively inexpensive mortgage insurance. It is a great option for first-time home-buyers with a lower income who have a good credit score.

Speak With MyLendingPal Today

woman looking at her laptop with the word mortgage on it to determine the best loan rateReach out to our team today at MyLendingPal to learn more about the different types of loan programs for first-time home-buyers. If you are a first-time home buyer we can help you secure the best loan possible and ensure you have all of your questions answered along the way. We can also help you out with other types of loans. Speak to our expert team today to see how we can help you secure the loan you need.

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MyLendingPal, Inc, NMLS ID #1734346, (www.nmlsconsumeraccess.org); Corporate Office: 5400 Laurel Springs Parkway, Suite 304, Suwanee, GA 30024. Georgia Residential Mortgage Licensee #61544. Principal Loan Originator: Ricky Merchant, NMLS ID: 1517056. Georgia License # 54264. For questions regarding state licensing, please contact (404) 433-8918. Not all products and options are available in all states. Terms are subject to change without notice. Any rates or terms are speculative only and can change without notice.
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MyLendingPal, Inc
MyLendingPal, Inc
5.0
Balachandar Sundaresan
Balachandar Sundaresan
17:30 23 Jun 20
Roger Merchant and his team were very helpful, right from getting a great rate to completing all process on time and being super responsive. Would happily recommend him!!
Dinesh Nair
Dinesh Nair
14:41 30 Jan 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Ramesh Kumar
Ramesh Kumar
02:03 17 Dec 19
I would really recommend Nations First Home Mortgage, if you are looking for the best home mortgage options. I was very much glad to work with this team and they have saved lot of time and money!!
gulshan rai
gulshan rai
03:21 17 Apr 19
I would highly recommend Mr Roger to anyone in the area looking for an amazing lender. He made the mortgage process so easy and effortless. I could tell him and his team were very attentive to all the details that came with applying for a mortgage and were quick to remind me of any deadlines that were approaching.It was super easy to work with Mr Roger.My special thanks to preeti who did an amazing job to get things done in the timely manner. If I had any questions, it was almost like she was waiting at her desk for my phone call to answer the questions immediately. The loans closed on time and without a glitch. I would highly recommend them to anyone
Ajith Nair
Ajith Nair
01:50 13 May 19
We highly recommend Roger for financing mortgage. Roger and his team were excellent through out the process and we had a very smooth purchase. They were always available when we had any questions. It was an amazing experience working with Roger and his team.
Pratul Patwari
Pratul Patwari
13:03 20 Jul 20
Roger Merchant and Priti Vin helped us in buying our first home. They understood our needs and took care of everything for us. They were very good with the communication through the process. They will always be my first choice in future for the mortgage services.
Sujatha Hariharan
Sujatha Hariharan
20:51 26 Jul 20
They were able to find me great rates. Service was quick and communication prompt. The loan process can be daunting as is the document gathering process but this was the easiest and quickest that I have experienced. Highly recommend!
Dinesh Nair
Dinesh Nair
15:53 30 Jul 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Manu Pushpanath
Manu Pushpanath
15:59 29 Jul 20
Great lender to work with. Right from document collection till closing they did it in 2weeks. The fastest closing I heard and get to experience myself. One improvement I suggest is it will be good if the closing attorney can come into the house for completing the closing. Considering current situation it will add a lot of value to the reputation. Thanks Milan and team for a good closing experience.
Sakthi S
Sakthi S
20:46 01 Sep 20
Would definitely recommend Roger and his team.Refinanced for the second time and with roger, I didn’t feel like I refinanced.The process was very smooth and fast.The rates were very competitive and it was amazingworking with Roger and his team.I’d recommend him for sure.
Sunny Patel
Sunny Patel
21:17 01 Sep 20
They were quick, courteous, and professional. They got me an excellent rate and helped make the process smooth. I would recommend using to my friends and family!
Emmitt Rathore
Emmitt Rathore
14:57 22 Dec 20
Roger helped us find an unbeatable rate!His decades of work in the industry made it easy for us to complete many processes with the lender, and helped us close on time!I will definitely be passing the good word around and recommending family and friends to him.I look forward to our next real estate transaction with them.
M Alamoti
M Alamoti
01:02 11 Jan 21
I had the experience of using their service. They know what they are doing. They are very honest, professional and caring. I have no doubt and hesitation to recommend them to anyone who is looking to purchase a home. I am very pleased for their service.
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